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Proposed NAFTA Rule of Origin Changes Could Yield Significant Gains in Certain Imports

Monday, December 23, 2013
Sandler, Travis & Rosenberg Trade Report

The International Trade Commission released Dec. 19 a report concluding that a fourth set of proposed modifications to the NAFTA rules of origin is likely to have a negligible effect on U.S. industry but could result in a significant increase in U.S. trade in certain products.

The report provides advice on the probable economic effect of 212 proposed modifications on U.S. imports and exports under NAFTA, total U.S. imports and exports, and domestic industries producing the affected articles. According to the ITC, many of the proposals would liberalize the current rules by allowing more non-originating inputs (i.e., inputs not originating in Canada, Mexico or the U.S.) through a change in the tariff shift rules and/or by removing or reducing the regional value content requirements. These modifications affect a wide variety of articles, including edible preparations; mineral fuels; chemicals; plastics; rubber articles; cork; glass and glassware; copper, nickel and other base metals; machinery and parts; rail locomotives; trailers; optical and medical instruments; furniture; toys and games; lighters; and smoking pipes.

The ITC concludes that with the proposed changes U.S. imports from NAFTA partners would likely increase significantly or substantially for the following products.

- certain other saturated chlorinated derivatives of acyclic hydrocarbons (HTSUS 2093.19)

- benzoyl peroxide and benzoyl chloride (HTSUS 2916.32)

- salicylic acid and o-acetylsalicylic acid (HTSUS 2918.21-2918.23)

- acyclic amides and certain cyclic amides (HTSUS 2924.11-2924.21)

- fluorescent brightening agents and luminophores (HTSUS 3204.20-3204.90)

- inorganic products of a kind used as luminophores (HTSUS 3206.50)

- diesel engines for marine propulsion (HTSUS 8408.10)

- smoking pipes and cigars or cigarette holders (HTSUS 9614)

However, the likely effect on total U.S. imports for products covered by all of the proposed rules is expected to be negligible.

In addition, U.S. exports to NAFTA partners could potentially increase significantly or substantially for the following products.

- sauces derived from fish and non-alcoholic preparations of yeast extract (HTSUS 2103.90)

- certain oxygen-function amino-compounds (HTSUS 2922.11-2922.21)

- waste pharmaceuticals (HTSUS 3006.92)

- beauty or make-up preparations and preparations for hair (HTSUS 3304.10-3305.90)

- chemical products and preparations not elsewhere specified or included (HTSUS 3824.90)

- polymers in primary forms; plastic resins; silicones; cellulose (HTSUS 3901-3914)

- inner tubes; hygienic or pharmaceutical articles of rubber; and articles of apparel and accessories of rubber (HTSUS 4013-4015)

- other articles of copper not elsewhere specified (HTSUS 7419.99)

- microphones and their stands; loudspeakers; and headphones and earphones (HTSUS 8518.10-8518.30)

- sound recording and reproducing apparatus (HTSUS 8519.20-8519.89)

- sunglasses (HTSUS 9004.10)

Only one of the proposed rules, which affects certain sauces, would likely have a significant effect on total U.S. exports. Any increase in total U.S. exports of all other products is expected to be negligible.

Finally, for each of the 212 proposed modifications, the effect on U.S. industries producing the affected articles is expected to be negligible.

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